“Our fall 2013 survey results suggest teens are experiencing general
spending fatigue across key categories, specifically fashion related
items. The absence of a clear product catalyst is a key contributing
factor to diminished spending proclivity. Intent to spend also
moderated, despite over two-thirds of teens signaling confidence the
economy is stable to improving,” said Steph
Wissink, co-director of research and senior research analyst at
Piper Jaffray. “We are also observing trends that imply teens are
browsing regularly on their mobile devices, shopping less frequently and
engaging with brands ‘on demand’ on their own time. This dynamic alters
the assumptions surrounding the square footage and retail inventory
needed to service this target demographic. A period of rationalization
may be needed.”

Key findings from the survey in fashion, beauty and personal care,
restaurants, media, gaming and entertainment include the following:

The fashion category accounts for roughly 39% of teen budgets,
consistent with prior survey cycles. Spending declined mid-single
digits to the prior year and prior season. Shopping frequency declined
and trip measures are down nearly 25% from prior peak. Evidence
suggests that households are digesting the payroll tax increases from
early-2013 as parent contribution to teen spending returned to normal
levels. Within the fashion category specifically, footwear is
outperforming apparel and accessories and insights into key trend
changes include a modest improvement in action sports mindshare,
further contracting demand for fast fashion, a stable refined classic
or preppy aesthetic, and growing preference for fashion athletic wear.

Teens are shopping less in single brand, vertically integrated
stores and more in multi-branded, multi-category and online retail
environment. Approximately 78% of females and 82% of males shop
online, and respondents indicated that a mid-teens percentage of their
spending is online. Roughly 60-70% of teens indicate they prefer to
shop the Web sites of their favorite stores-based retailers. In
addition, teens prefer labels to logos and seek value in their
purchases, owing to the rise of spending in the outlet and off-price
channels. Approximately 71% of teen girls and 57% of teen boys shop at
off-price stores and 52% and 45%, respectively, indicated it is
popular to do so. The shift toward digital is proliferating softlines,
hardlines and media purchases. DVD by mail and streaming account for
52% of movie rentals and online music provider Pandora accounts for
25% of preferred music sources.

Teens have cited "friends" as the strongest influence over their
purchase decisions for the duration of our survey history, but
"Internet" is quickly rising in profile. More than half
of teens indicate that social media impacts their purchases with
Twitter being the most important, eclipsing Facebook, followed closely
by Instagram. But the popularity of Facebook is waning among teens
with 23% citing it as the most important, down from 33% six months ago
and 42% a year ago.

Beauty spending among upper-income teens declined high single to
low double digits to the prior year and prior season. MAC was
cited as the No. 1 cosmetics brand for upper-income teens for the
sixth survey in a row and Cover Girl ranks at the top of the list for
average-income teens. Teens continue to demand greater diversity of
cosmetics offerings, likely spurred by several emerging cosmetics
brands coming to market with new and superior innovations.

Teens are increasingly choosing organic food options, with 39%
eating organics versus just 33% two years ago. This trend is
likely to support ongoing demand for natural and organic grocery, as
teens age into young adults and establish independent households. When
eating out, 60% of teens prefer limited service restaurants, up
steadily from 43% four years ago. In addition to classifying by
segment, preferred restaurant brands also provide insight into various
cuisine profiles—for American Cuisine, teens favor Cheesecake Factory;
for Italian, teens favor Olive Garden; and for Mexican-inspired fare,
teens favor Chipotle Mexican Grill.

Teens represent more than one-third of video game players and
gaming accounts for 7% of teen spending. Interest in traditional
gaming consoles remains strong entering a new console cycle. Awareness
of next generation consoles was 86% among teens that play video games
at least monthly. Approximately 49% of teens intend to purchase a next
generation console. Buying and selling used video games remains a
critical component of the gaming industry, with 64% of gamers buying
used games and 26% of teens trading in old games to fund new software
and hardware purchases.

The "Taking Stock With Teens" survey is a semi-annual research project
comprised of gathering input from approximately 8,650 teens with an
average age of 16.2 years. Teen spending patterns, fashion trends, and
brand and media preferences were assessed through visits to a
geographically diverse subset of high schools in 13 U.S. states and
through a national online survey of a wider group of teens from 37
different states. The survey is conducted in partnership with DECA,
an international association of high school students. The survey was
completed during the month of September 2013.

About Piper JaffrayPiper
Jaffray is a leading investment bank and asset management firm
serving clients in the U.S. and internationally. Our proven advisory
teams combine deep industry, product and sector expertise with ready
access to capital. Founded in 1895, the firm is headquartered in
Minneapolis and has offices across the United States and in London and
Zurich. www.piperjaffray.com